Tag Archives: CBO

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CBO: Biden student loan forgiveness to cost $400 billion

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The White House’s plan to cancel student loan debt for tens of millions of American borrowers will cost roughly $400 billion, according to a new estimate released by Congress’ nonpartisan scorekeeper.

The scorekeeper also found that the White House’s plan to temporarily extend an existing pause on student loan payments would cost roughly $20 billion.

The new estimate will add new fuel to the debate over President Biden’s student debt decision, which was cheered by advocates but immediately assailed by Republican lawmakers as a wasteful and inefficient use of government money. Biden announced in August that his administration would cancel up to $20,000 in student debt for lower- and middle-class borrowers.

Supporters of student debt cancellation have argued that similar estimates in the past have overstated the policy’s cost to the federal government, because despite formally owing the federal government money many borrowers never pay back the loans.

Student loan forgiveness application coming in October, White House says

The CBO estimate excludes the White House’s simultaneous move to lower the monthly amount borrowers can be forced to repay as a percentage of their income from 10 percent to 5 percent. That policy is set to cost an additional $120 billion, according to estimates from the Committee for a Responsible Federal Budget, a D.C.-based think tank that has opposed Biden’s policy.

“The president announced possibly the most expensive executive action in history without a score, and we’re now seeing just how expensive this policy is going to be,” said Marc Goldwein, senior vice president for policy with the Committee for a Responsible Federal Budget, in an interview before the score’s release.

More than 40 million Americans could receive some level of student loan relief under Biden’s plan. Half of those could have their debt completely canceled, according to the White House. The administration estimates that 60 percent of borrowers are entitled to have their debt reduced by $20,000 because they received Pell Grants, federal aid for lower-income students, as undergraduates.

Who qualifies for Biden’s student loan forgiveness plan?

A recent analysis by the Census Bureau said Black and Hispanic women could benefit the most from the one-time cancellation policy. Both groups hold a disproportionate share of education debt relative to their peers.

White House officials have said the typical Black borrower will see their balance cut nearly in half, and more than one in four will have their debt erased altogether, even before applying the additional $10,000 for Pell recipients.

Roughly 8 million borrowers, whose income is already on file at the department, will have their loans automatically forgiven without having to apply, according to the Education Department. Everyone else will have to apply in early October, when the agency expects to release the form.

GOP lawmakers and state attorneys general have said they are exploring the possibility of a lawsuit to overturn the policy before it goes into effect. One conservative group, the Job Creators Network, has said it plans to sue the administration once the Education Department guidance is released.

Calculate how much of your student loan debt can be forgiven

Some economists cautioned that opponents of the policy frequently overstate its price-tag. Marshall Steinbaum, an economist at the University of Utah, said his research suggests that more than 60 percent of outstanding student loans have rising balances over time — suggesting that many of them are not being paid off.

“A very large share of already outstanding student debt was not going to be repaid anyway, so I’m curious how the CBO will account for the fact that most student debt was already uncollectable,” said Steinbaum, who supports student debt cancellation, in an interview before the CBO’s release.

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White House stands by Inflation Reduction Act after CBO warns inflation won’t drop as a result

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FOX Business’ Madison Alworth reports from the Jersey Shore. 

The White House is defending the Inflation Reduction Act against a report from the nonpartisan Congressional Budget Office that suggests the legislation will not meaningfully lower inflation in the coming years. 

“Could you address the new CBO analysis about the Inflation Reduction Act that says it would have almost no impact or negligible impact on inflation in 2022 and 2023,” White House press secretary Karine Jean-Pierre was asked during a Friday briefing.

Jean-Pierre responded, “You know, leading economists have said that this Inflation Reduction Act that’s been analyzed by them, that’s been looked at by these economists, will indeed reduce inflation.”

Jean-Pierre was then asked if her answer means she is “dismissing” the CBO report and whether it is fair to call the legislation the “Inflation Reduction Act” when the CBO is saying inflation will not be meaningfully reduced. 

SOARING INFLATION DRIVES MORE AMERICANS TO LIVE PAYCHECK TO PAYCHECK DESPITE 5.1% INCREASE IN WAGES

White House press secretary Karine Jean-Pierre speaks during the daily briefing at the White House in Washington, D.C. (AP Photo/Susan Walsh / AP Newsroom)

“Well, if you think about the Inflation Reduction Act, it will have an effect also on drug costs,” she explained. “Lowering prices on pharmaceutical costs, which is going to make a difference in a big way to seniors to families.”

Jean-Pierre went on to say that the legislation will lower energy costs, the cost of utility bills and Medicare, while also putting $300 billion toward lowering the deficit. 

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A man shops at a Safeway grocery store in Annapolis, Maryland. (Jin Watson/AFP via Getty Images / Getty Images)

“That is going to make a difference,” Jean-Pierre said. “That is going to fight inflation, and so it should be called the Inflation Reduction Act, because that’s exactly what it’s going to do.”

Jean-Pierre was reacting to a report this week from the CBO that said the bill would have a “negligible” effect on inflation. 

“In calendar year 2022, enacting the bill would have a negligible effect on inflation, in CBO’s assessment,” the office said. In calendar year 2023, inflation would probably be between 0.1 percentage point lower and 0.1 percentage point higher under the bill than it would be under current law, CBO estimates.

Jean-Pierre’s defense of the legislation comes the same day Senate Majority Leader Chuck Schumer, D-N.Y., said that a group of 230 economists who are warning that the legislation will increase inflation are “wrong.”

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“They’re wrong..I don’t know who that list was… it’s as plain as the nose on your face,” Schumer told reporters.

The economists wrote in the letter that the U.S. economy is at a “dangerous crossroads” and the “inaptly named ‘Inflation Reduction Act of 2022’ would do nothing of the sort and instead would perpetuate the same fiscal policy errors that have helped precipitate the current troubling economic climate.”

U.S. job growth unexpectedly accelerated in July, defying fears of a slowdown in hiring even as the labor market confronts the twin threats of inflation and rising interest rates.

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C.B.O. Finds Biden’s Spending Bill Not Fully Paid For

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There were bright spots for Mr. Biden and his party in the budget office analysis. It confirmed that in the eyes of the congressional scorekeepers, the Democratic bill would add significantly less to deficits over a decade than the large collection of tax cuts Republicans passed under President Donald J. Trump in 2017. The budget office initially estimated that those tax cuts would add about $1.5 trillion to deficits, even as Republicans claimed their cuts would pay for themselves.

The single biggest source of revenue stems from a new 15 percent tax that would apply to corporations that report more than $1 billion in profits to shareholders but not the I.R.S. The budget office found that a tax on so-called book income would raise about $319 billion over 10 years.

Senator Elizabeth Warren, the Massachusetts Democrat who proposed the new tax, released an analysis on Thursday morning showing that at least 70 of the largest companies in the United States would pay more as a result of the new levy. The report by Ms. Warren found that the tax would require companies such as Amazon, Facebook, FedEx, General Motors, Google, T-Mobile and Verizon to pay more to the U.S. government.

The analysis also suggests that the Democratic plan could begin to reduce budget deficits a decade from now, if provisions in the bill expire as scheduled. The bill’s tax increases are permanent, while many of its tax cuts and spending programs are set to be temporary, a move that Republicans have criticized as a budget gimmick intended to keep the overall cost down.

“Here what we’re doing is making smart long-term investments but offsetting those with tax increases,” Brian Deese, the director of the National Economic Council, said Sunday on ABC’s “This Week.” “When you do that, a fully paid for, you actually reduce the deficit over the long term.”

If a future Congress chose to extend those spending programs and tax cuts, though, or to make them permanent, and did not offset them with further tax increases, the bill would add significantly to deficits after a decade. Budget experts have warned of that possibility, which was also true of the Republican tax law. It set individual tax cuts to expire after 2025, even though Republicans immediately vowed to work to make them permanent.

Republicans have accused Democrats of gaming the budget rules by providing child care and health care tax credits and universal preschool that would expire but which Democrats hope will be made permanent. A new $80,000 cap on the state and local tax deduction would slip back to $10,000 for a year in 2030 before it expired the following year.

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CBO says Build Back Better will increase deficit by $367 billion not including increased tax enforcement, House to vote tonight

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The House moved closer to a final vote on Build Back Better on Thursday, hours after the nonpartisan Congressional Budget Office (CBO) released its final cost estimate of President Biden’s signature social spending plan.

The CBO said Thursday that passage of the legislation would increase the deficit by more than $367 billion over 10 years. But the estimate does not include the revenue that could be generated from increasing IRS enforcement, which the CBO suggested would be $207 billion.

Treasury Secretary Janet Yellen welcomed the CBO’s analysis: noting that the Treasury Department estimates that the crackdown on tax evaders would raise $400 billion, she said in a statement that the combined CBO scores, Joint Committee on Taxation estimates and her own department’s analysis “make it clear that Build Back Better is fully paid for, and in fact will reduce our nation’s debt over time by generating more than $2 trillion through reforms that ask the wealthiest Americans and large corporations to pay their fair share.”

The White House called the CBO score “good news for Democrats,” and House Speaker Nancy Pelosi immediately began moving forward with the bill. Representative Stephanie Murphy, one of the key moderate holdouts who had been waiting for the CBO score to vote, said Thursday evening that she’d vote for the bill.

Speaker of the House Nancy Pelosi (D-CA) talks to reporters during her weekly news conference in the U.S. Capitol Visitors Center on November 18, 2021 in Washington, DC. 

Chip Somodevilla / Getty Images


The CBO has been releasing estimates on individual components of the Build Back Better Act over the past few weeks, but did not address  how much money the legislation would raise, or its cost, until Thursday.

TOverall, the CBO estimates the legislation would spend$1.63 trillion. The office said changes to the tax code and other provisions would generate more than $1.26 trillion in revenue and suggested increased IRS enforcement would add another $207 billion in revenue (not included in CBO totals.

Some of the CBO figures have come in lower than what the Biden administration estimated. The cost of universal pre-K and affordable child care would cost roughly $382 billion, the agency found, compared to the bill’s line item figure of $400 billion. Prescription drug reforms would save nearly $300 billion — $50 billion more than the White House estimated. Other estimates were closer: both put affordable housing related costs at roughly $150 billion. And the CBO said expanding Medicare to include hearing would cost $36 billion, while the White House said it would be  $35 billion.

The CBO also estimated that a four-week paid leave included in the House version of the bill would cost $205 billion. That provision was not included in the revised White House framework because paid leave had been dropped from the bill but was later partially restored by lawmakers. 

The White House, which estimated its framework would cost $1.75 trillion, has argued the legislation would be fully paid for and even claimed it would reduce the deficit over time, generating more than $2.1 trillion over 10 years.

Lawmakers and the White House were eager to see the CBO’s score, particularly  after five House Democrats sent a letter to Pelosi saying they could not support the bill until they had reviewed the information and Joint Committee on Taxation to ensure the final bill was “indeed fiscally responsible.”

Senator Joe Manchin, one of the centrist holdouts in the Senate, also said he wanted to see the analysis of legislation before committing to supporting it. 

Meanwhile, the Joint Committee on Taxation estimated the bill would rake in $1.48 trillion. But its analysis did not include how much revenue increased IRS enforcement would generate. 

This has been a sticking point. Democrats have proposed giving the IRS $80 billion in an effort to ramp up tax collection from  the wealthiest Americans. The Treasury Department estimates it would raise $400 billion over a decade, making it the largest revenue-raiser in the proposal. Some organizations and lawmakers have suggested that estimate is too conservative. 

The CBO estimated the spending would generate $207 billion in new revenue, a net increase of $127 billion, far less than the Biden administration claims. Earlier this week, CBO director Phill Swagel explained ultimately the IRS would determine what additional resources would be utilized. But he said research on how effectively  increased enforcement acts deters tax evasion is mixed, so his office arrived at a number closer to the midpoint of the White House estimate. 

Another controversial component of the bill contributing to the price tag is the increase of the state and local tax deduction cap, commonly known as SALT. Some moderate House Democrats insisted an amendment be added that will increase the current SALT cap from $10,000 to $80,000. 

The Biden administration also did not include SALT in its framework. The provision is estimated to be one of the most expensive pieces of the legislation and analysis shows it vastly benefiting the wealthiest  Americans. 

While those backing increased deduction argue, the cap set as part of former President Trump’s 2017 tax law unfairly hurts their constituents, it has become a point of contention among Democrats and faces obstacles in the Senate.

Jack Turman contributed to this report.

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